COVID-19 presents an issue that we haven’t grappled with since WWII, which is how do industries overcome a global crisis? US manufacturing heeded the call 60 years ago when consumer product manufacturing shifted to defense. Rather than cripple the economy, the war effort created new jobs and introduced innovations like radars, penicillin, and jet engines.
In 1941, The Great Depression stalled production and disincentivized manufacturers from producing materials intended for overseas conflict. The bombing of Pearl Harbor was a wake-up call that the US was unprepared for an inevitable attack. To develop resources he needed in a crisis, FDR and Congress passed the Second War Powers Act that gave the president power to commandeer supplies and operations in support of a mass war mobilization effort. By redirecting production to address an emergency, US manufacturing output increased by 300%.
The Defense of Production Act, passed in 1950 to prepare for the Korean War (“Conflict”), was inspired by WWII mobilization efforts. The DPA limited some presidential powers and called for requisition of manufacturing operations in the absence of a formal war. Over time, the DPA expanded in scope to grant the president power over industries making government contracts a priority.
While COVID-19 is forcing the US into an economic coma likely to become a Great Recession, it will also produce new realities with potential benefits. Here, Meta Fab explores how COVID-19 will impact the workforce and culture, and how COVID-19 highlights manufacturing as the backbone to our global economy.
The following reviews COVID-19 in the context of six supply chains: steel fabrication/electronics, medical/pharmaceutical, and textile/chemical.
COVID-19 presents a highly unusual disruption in trade and supply chain. While manufacturing constitutes an ‘essential business,’ production has slowed in part to staffing shortages, decreased travel & construction, and economic uncertainties.
In the short term, few companies are prepared to meet the current demand for medical equipment – particularly ventilators. As the manufacturing industry comes together to ramp up production, precision sheet metal fabrication will see a bump in demand. Similarly, COVID-19 has increased demand for electronics as more people rely on technology to communicate and learn. So far, steel manufacturers haven’t experienced shortages or changes in steel prices.
The long term impact of COVID-19 on electronics may be more profound as employers and educators see the benefits of remote work/education. After shutdowns and stay-at-home orders force changes in habits and skills, the workforce will increasingly become more proficient in video conferencing and remote work, and less tolerant of long commutes and traffic. Employers, too, may see cost savings from relying more on productivity and less on office dynamics, which will shift economic activity away from traditional offices towards technology.
Moreover, COVID-19 reminds the world how valuable workers and manufacturers are to the global economy. Within factories are workers who ensure life-saving products move to those who need it. Continued and redirected manufacturing operations that serve a national call for help (also discussed below) underline the essential nature of manufacturing work.
In short, the biggest challenge steel manufacturers face is uncertainty as part of the supply chain. That said, COVID-19 increased demand for medical equipment and electronics. Continued reliance on habits formed to cope with COVID-19 will have long term changes on how people work and live furthering growth in electronics and steel manufacturing industries.
Medicine and Medical Supplies
COVID-19 exposes the fragility of the global pharmaceutical supply chain as drugs are sensitive to (among many factors) local demand, different regulations, and expiration/contamination. Medicine and supplies sourced from China created reduced global stockpiles. For example, India placed export restrictions on 26 pharmaceutical ingredients that Europe and the US rely upon – ingredients India sourced from China. Countries around the world are enacting or changing policies to address drug and supply shortages. Russia, for example, lifted its ban on foreign company bidding on government contracts, which has significant and fundamental ramifications for their medical supply procurement process.
In addition to obtaining drugs sourced around the world, the US is experiencing a shortage of COVID-19 testing kits. US governors asked the federal government to invoke The Defense of Production Act, which was considered, but later rejected as the federal government stated it was able to obtain testing kits without invoking an order.
The White House ultimately signed DPA forcing General Motors to produce ventilators after a series of discussions on terms and stated that other industries will also be asked to redirect production to support emergency supplies.
In short, the medical supply industry spurred the current US policy shift from seeking voluntary business aid to an order. Voluntary efforts, however, are active and demonstrate the innovative and transformative nature of manufacturing.
COVID-19’s impact on demand is profound. Stay-at-home orders and fear of infection reduced retail and restaurant purchases. Loss of revenue and employee layoffs are forcing businesses to evaluate how to maximize the use of their space, supplies, and resources. Through creativity and desire to help, distilleries and apparel companies are manufacturing products to address the COVID-19 crisis.
In addition to ventilators, the US is experiencing a shortage of medical masks and gowns necessary to protect healthcare workers from infection. To support America’s effort to overcome COVID-19, designers, and apparel industries are converting their operations to produce required items. These efforts also reveal the pitfalls and complications that go with repurposing operations. Some designers are unfamiliar with fast production for volume, lack the required materials and/or need assistance following/understanding guidelines around medical-grade gear. Hiccups notwithstanding, apparel companies are heeding the call to help with over a million articles of clothing for healthcare workers.
Though it isn’t subject to the current DPA order, distilleries are addressing an urgent need for hand sanitizer. Over 500 distilleries nationwide are producing hand sanitizer, thereby keeping their operations open and workers active.
Summary: Out of crises, profound social and economic shifts frequently occur.
COVID-19 has tragically claimed the lives of 50,000 people globally in less than three months. Thousands of workers are unemployed, small businesses and founders face financial ruin, nonprofit funding will dry, and the most vulnerable in society will suffer that much more. These are only a handful of tragedies created by the coronavirus, yet as with other global crises, the world will adapt and learn to become stronger.
COVID-19 has shown us that while individual products will come and go, manufacturing remains fundamental to the global economy. From food to medical supplies, manufacturers provide essential goods that keep civilization functional. In that vein, electronics and precision sheet metal fabrication will likely grow as a result of habits that formed while coping with COVID-19.
As with the urgency created by The Great Depression and WWII, COVID-19 will reveal that not only does the country benefit when manufacturers heed the call to national duty, they’re less vulnerable to economic pitfalls when repurposing operations keeps workers employed and the lights on. The war effort introduced the demand for new technology requiring manufacturers to explore and innovate. The outcome produced life-saving medication and equipment used today. The same can be said for the work our medical experts are conducting to fight COVID-19.
Front line workers from welders to grocery clerks are being recognized as essential to the economy. With this recognition may grow a newfound appreciation for the blue-collar sector vis-a-vis improved benefits and financial support. It’s worth noting that one of the better outcomes of the Black Death was social mobility upon realizing the value of labor.
COVID-19 highlights humans’ incredible ability to adapt to rapidly changing conditions and environments. Video conferencing has enabled industries to stay open and workers productive, thereby reducing what could conceivably be a much higher unemployment rate. As industries learn that production is not compromised by remote work, it’s possible traditional office models will decline in favor of fewer commutes and lower office overhead.
Also, because video conferencing has been introduced as a daily work necessity, people are exploring its full functionality in their personal lives. Consequently, video conferencing has brought distant families and friends together. Having dinner with loved ones remotely now seems normal and can continue as a practice.
Other unintended outcomes of COVID-19: sanitary/health habits and climate change abatement. COVID-19 exposed the extent to which communities ignore or were unfamiliar with health and sanitation standards. Thoroughly washing our hands, cleaning our spaces, and preventing the spread of germs has been a necessary refresher emphasized by urgency. Moreover, with fewer cars on the road, air quality has noticeably improved. As industries realize the value of telecommuting and workers are relieved of long, daily commutes, the environment can and will react.
In short, COVID-19 is a pandemic expected to wreak hardships worldwide. Yet, out of this tragedy humans can learn, innovate and improve together.
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